Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements On January 1, 2016, the Mason Manufacturing Company began

Calculate the amount of interest expense that will appear in the 2016 and 2017 income statements

On January 1, 2016, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2017.

Expenditures on the project were as follows:

January 1, 2016 $ 1,280,000
March 1, 2016 960,000
June 30, 2016 1,160,000
October 1, 2016 960,000
January 31, 2017 324,000
April 30, 2017 657,000
August 31, 2017 954,000

On January 1, 2016, the company obtained a $3,600,000 construction loan with a 15% interest rate. The loan was outstanding all of 2016 and 2017. The companys other interest-bearing debt included two long-term notes of $4,000,000 and $6,000,000 with interest rates of 11% and 13%, respectively. Both notes were outstanding during all of 2016 and 2017. Interest is paid annually on all debt. The companys fiscal year-end is December 31.

Required:
1.

Calculate the amount of interest that Mason should capitalize in 2016 and 2017 using the specific interest method.

2.

What is the total cost of the building?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Belverd E. Needles, Marian Powers, Susan V. Crosson

9th edition

1439037809, 978-1439037805

More Books

Students also viewed these Accounting questions

Question

Explain the difference between SHIFT and ROTATE instructions.

Answered: 1 week ago